Handy rule of thumb I got from the Videomaker Conference last week.
"The bigger your light source the softer the shadow.
The smaller your light source the harder the shadow."
This helps explain why a light diffuser softens the shadows on your talent. It's bigger so the shadows are softer. The sun is a small source and will give you a hard shadow. Clouds will diffuse the sun's light making it a bigger source which then softens the shadows.
This is one of those handy references that kids (and their doddering old teacher) can remember when lighting a shoot. I'm not enough of an expert to know if this holds true 100% of the time (and I neglected to ask this question) but it worked with every example they showed us.
[Image: "Sun sets for the last time in 2008": Flickr: Uploaded on March 2, 2006 by Pandiyan: http://www.flickr.com/photos/pandiyan/106707806/]